Mostly a fragrance. There's no good evidence it treats skin, and air-oxidized lavender oil forms strong contact allergens.
Lavender essential oil is mainly linalool and linalyl acetate. In body washes, lotions, soaps and deodorants it is there for scent, sometimes with 'calming' or 'bedtime' positioning.
Those terpenes react with air to form hydroperoxides, which are potent skin sensitizers, so older, air-exposed oil is more likely to cause allergy than fresh oil. Lavender products have also been linked in case reports to breast growth in children who used them regularly.
There are no good trials showing lavender oil improves any skin condition when used in personal-care products, and aromatherapy findings don't transfer to a short wash-off exposure. Its allergy risk after oxidation is well documented. Case reports link regular lavender-product use with reversible breast growth in children, but causation is unproven.
Lavender oil's terpenes oxidized on air exposure to form hydroperoxides, raising its sensitizing potency in mice; patients allergic to oxidized linalool reacted on patch testing to air-exposed lavender oil.
Three prepubertal boys developed breast enlargement while using products containing lavender and tea tree oils; it resolved after they stopped, and both oils showed weak estrogenic and anti-androgenic activity in human cell lines. Causation was disputed in later correspondence.
Three girls and one boy with early breast growth and continuous exposure to lavender-fragranced products improved after stopping; several essential-oil components had estrogenic or anti-androgenic effects in cell lines, but whether real-world exposure is enough is unknown.